Go to the Federal Reserve System's website at https://www.federalreserve.gov and search for Aggregate Reserves of Depository Institutions
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Question:
Go to the Federal Reserve System's website athttps://www.federalreserve.gov and search for Aggregate Reserves of Depository Institutions and the Monetary Base (Table H.3) located athttps://www.federalreserve.gov/data.htm). Select and open the most recent version of this table and review the data to answer the following questions.
- What is the latest level of required reserves? What are total reserves?
- Based on your answer to part a, what is the approximate average required reserve ratio? (Different banks are subject to different requirements, based on size, but for the purposes of this problem, we want to know the average requirement in the banking system.) Calculate the money multiplier.
- Are banks keeping excess reserves? What is the potential for deposit creation?
- Return tohttps://www.federalreserve.gov/data.htm and search for the table called "Money Stock Measures (H6)." Select and open the most recent version of the table and review the data there. What is the current level of the M1 money supply? If all of the potential deposits from part c were actually created, what would be the new level of the M1 money supply?
- Increases in the money supply without increases in real GDP lead to increases in the price level because the economy is simply using more money to buy the same amount of stuff. Assuming all other things equal, how much inflation (as a percentage) would this deposit creation cause?
Related Book For
Money Banking and Financial Markets
ISBN: 978-0078021749
4th edition
Authors: Stephen Cecchetti, Kermit Schoenholtz
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